Europe's tug-of-war battle with the United Kingdom over the City stepped up on Friday as its central bank called for more legal powers over London's financial sector.

The central bank is paying particular attention to "systemically important" clearing houses that sit outside member states and clear "significant amounts of euro-denominated transactions". At present, around 90% of those trades - worth around $900 billion each day - are cleared via banks and institutions in London and E&Y estimates that as many as 83,000 jobs could be lost if the industry leaves for the United Kingdom.

The City dominates the market of clearing, a process which is supposed to reduce the risks in complex financial transactions by matching buyers and sellers as well as reducing the cost of trading, through the use of clearing houses.

Coeure expressed support for a framework that allows European Union regulators to deny recognition to CCPs posing excessive risk to European Union financial stability, ultimately forcing those entities to reestablish activities in the bloc in order to continue providing clearing services there.

The Recommendation was sent to the European Parliament and the Council for the adoption of a Decision amending Article 22.

The London Clearing House (LCH), which is owned by the London Stock Exchange (LSE), is now clearing most of the euro-denominated interest rate swaps - the common derivative contract used by companies in the European Union. European Central Bank executive board member Benoît Coeuré had hailed the EU Commission's proposal on the issue as a step in the right direction. It lost a legal battle over the issue two years ago in the EU's second-highest court, but Britain's departure from the European Union has lent fresh impetus to its efforts.

"This is a necessary legal step to give the European Central Bank the powers and jurisdiction that it will need as the EU's institutions assert supervisory authority over third-country CCPs", said Vincent Keaveny, partner and co-chair of financial services at DLA Piper. "Indeed it can damage it", Carney said "Fragmenting clearing would lead to smaller liquidity pools in CCPs, reducing the ability to diversify risks and diminishing resilience".

Under the proposed amendments to the EMIR framework, the Eurosystem will be able to continue to fulfil its role as the central bank issuing the single currency.

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